With multiple investment options in the country, it’s become challenging for new and experienced investors to choose the most viable options that pose no significant risks of losses as an outcome of economic volatility.
Real estate investment has been on the rise in the past few years, offering a wide range of benefits for investors. It’s become an excellent tool to build wealth with financial advantages, including increased cash flow, portfolio diversification, tax benefits, and massive returns on investments.
If you’re thinking of purchasing the best homes for sale colorado as a real estate investment, read on to learn why it’s a good idea in 2021.
Weakened Home Prices
One reason why people are usually skeptical about investing in homes is the skyrocketing land and property prices. While price fluctuations play a crucial role in helping people decide whether they should invest in real estate or not, it’s critical to look at how most houses in the United States have seen a decline in their median selling price since 2017.
According to the Federal Reserve Economic Data (FRED), real estate in America saw the first massive decline in home prices in late 2006 when the median sales reduced by 17%, going from $255,000 to $210,000. While this was a two-year process resulting from rapid migration, employment, and urbanization, the prices further dropped in early 2009.
The period from late 2009 to 2012 was a challenging period for house prices as it entertained higher prices than before. In fact, by 2017, home prices had exploded by 55%, going from $220,000 to $340,000.
However, prices have consistently been falling since this peak. The median price for homes in 2019 reduced to $310,000, a 9% decline in prices since 2017. This is why 2021 is the perfect year for real estate investments because these prices continue to fall.
Lower Mortgage Rates
Most people prefer to make real estate investments using mortgages instead of paying for properties in full to free up capital and acquire financial leverage. 2021 is an excellent year to apply for mortgages since their rates are on their way to further reduce in the future. From their first highs in 2018, there has been a 1% decline across multiple mortgage types, paving the way for real estate investors to make the most out of the opportunity.
Despite the chances of future reductions, the average mortgage rate for a 30-year fixed loan remains 3.75%. However, if you employ the right strategies, you can significantly minimize your mortgage rate. For example, you can first check mortgage rates with multiple lenders online and choose the best quotes available to you.
Stronger Stock Market
The Standard & Poor’s 500 closed at 31% in 2019, making stock investors incredibly rich. The S&P 500 refers to a stock market index that estimates the stock performance of 500 large corporations as a part of the United States stock exchanges. It indicates the impact of companies’ performance on the country’s economic health and how it’s likely to influence its future earnings. 2020 was a unique year with a miraculous 16% S&P 500 closing.
The stock market is at its strongest right now, which means most corporate organizations are doing well. It also indicates a potential rise in wage growth and lower unemployment rates. As part of the S&P 500, homebuilders are outperforming other industries, which means it’s the perfect time to invest in real estate without experiencing a divergence between property share price performance and asset price performance.
More Stimulus Packages from New Government
The democratic government has been a distinctive administration for the United States, especially for its efforts to ensure that its economy keeps growing during the COVID-19 outbreak. Joe Biden’s administration this year has played a crucial role in combatting economic uncertainty, especially for the stock market.
As a part of his comprehensive government agenda, Joe Biden plans to spend trillions of dollars in stimulus packages. It means it’s the perfect time to use your stimulus funds to retire under Joe Biden’s administration by making a viable real estate investment.
Increased Rental Income
A property or land’s rental income determines its original value. Many property owners in coastal cities rent out their homes at lower rental rates due to increased property prices. However, income-seekers in heartland cities like Colorado can make the most of their real estate investments by having higher cap rates for rental income.
Prime Purchasing Years for the Millennial Generation
Most millennials are now becoming eligible and stable enough to make important purchasing decisions. Most of them are entering their 30s this year with more than a decade’s savings to make easy down-payments. As more and more millennials with spouses and children strive for stability, they’re more likely to own a property where they can settle down.
According to the National Association of Realtors, a study indicated that single females in their late 20s and early 30s are purchasing homes to seek independent lives. In fact, these women dominate the home-buyer demographic after married millennials. Therefore, investing in real estate can be a significant step toward introducing affordable and good-quality housing for the millennial generation.
Fewer Market Fluctuations
Investing in stocks and bonds comes with a substantial amount of risk due to their massive correlation. It’s because stocks continue to decline when bond prices fall, increasing the risk of loss on investment.
However, if you’re looking to make risk-free investments, real estate is your best bet because commercial and residential properties are resilient in the face of economic volatility. Regardless of how weak the economy is, people need a place to live, and businesses need a property for smooth operations. As a result, they look for rental properties as a cost-effective option.
Making real estate investments in a high-demand atmosphere is an excellent way to escalate your cash flows. You can efficiently diversify your investment portfolio by purchasing properties without fear of losses because their value doesn’t depend on the economy. In fact, property appreciation and cash flow from rental income becomes a natural hedge against each other, making real estate a profitable investment.
If you’re looking for real estate investment opportunities in Colorado, feel free to reach out to the dedicated team of realtors at Flat Rate Realty Group. We’re here to help you find the best homes for sale in Colorado within a 90-day contract period. Contact us to begin your real estate investment journey today!